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Red Zone Rehabilitation Plan


jpod

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Contributing employer to a multiemployer pension plan received notice of the plan's election to elect red zone status early, coupled with the rehabilitation plan.  The rehabilitation plan's default schedule calls for NO increase in contributions, just reduction in some benefit distribution options and a few bells and whistles.  In order to avoid the employer surcharge under the IRC, the employer and union must amend their CBA to reflect the rehab plan.  The plan has produced a template of a MUA for bargaining parties to sign, in counterparts.  As far as I can tell from reading the rehab plan, the employer has no incentive NOT to do this, but what incentive does the union have?  If the employer signs but the union doesn't, does the surcharge apply?  

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  • 1 month later...

I am not sure the union has any choice.  I don't recall that they have to sign anything.  Typically, this is just adopted by the employers.  The union created the options.

The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.

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  • 2 weeks later...

On behalf of a client, I received the same MUA.  The fund at issue wanted to take advantage of the MPRA provision which allows a fund heading towards critical status to affirmatively elect Red Zone status preemptively.  This fund apparently did this so it could eliminate some early retirement type subsidies and then the next year, it will go back into endangered status and will not make the same election.  I advised my client to go ahead and sign to avoid the 5/10% surcharges. 

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